Category Archives: In-House Debt Collection Strategies

Tips and strategies for streamlining your in-house debt collection processes

Negotiate With Savvy

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Customer disputes require swift and savvy action. If you’re in a position to negotiate, follow these tips for success:

BEFORE YOU BEGIN DISCUSSIONS

Study the details

Don’t make a phone call or set up a meeting until you have studied everything there is to know about the case. Keep your notes and the case file ready so you can refer to information as needed.

Consider the dollar cost

Some disputes are worth hashing out while others need to be written off. Time is money, so if a dispute is only complicated by a difficult customer, it may not be worth the time.

ConfrontationDURING DISCUSSIONS

Don’t be confrontational

Instead of confrontation, begin discussions with questions. Questions open the door to dialog that may reveal a resolution you and your customer can benefit from.

Offer documentation

Here’s where keeping your notes and case file handy will pay off. In the event your customer wants proof of some claim you’re making, you’ll have everything you need to provide immediate proof.

Keep an open mind

Through the process of asking questions, keep an open mind to what your customer tells you. Perhaps the perspective he or she offers will be something you’ve not thought of before. And it could change everything.

Resolve the easiest issue first

This is a great way to set the tone for success when you are dealing with multiple issues with your customer. By coming to a good conclusion early in your discussion, you’ll be paving the way for open dialog going forward.

Make a list of possibilities

There may be many different ways to solve a problem. Make a list of the options. It will make it easier to weigh the costs and benefits to both you and your customer.

AFTER THE CONVERSATION

Put everything in writing

Write down the payment schedule you’ve agreed upon and any promises made during the conversation.

FOLLOW UP

Perhaps the most important thing in the entire process is follow-up especially when you’ve agreed to a solution that has yet to be implemented.

One simple way to do that is to send an email immediately after your conversation that outlines the promises made, the agreements you discussed and any other pertinent points. End the email with a question so that your customer will respond thus confirming receipt of the email. Even a simple end like, “Thank you for meeting with me today. Are there any questions we didn’t cover?”

Negotiating with a customer can be a tricky process. You can simplify it by following these tips.

What To Do When A Customer Breaks a Promise

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Broken Dollar SignImmediate Response Required

It’s disappointing (to say the least) when a customer breaks a promise to pay a past due invoice. The domino effect is costly.

Not only does a broken promise affect your bottom line, but it also brings into question the trustworthiness of the customer for any future purchases.

There’s no time to waste when addressing this problem. You must act swiftly with consequences you fully intend to carry out. Maybe you decide to hold the next delivery until you receive payment. Perhaps you switch to COD for a time. A severely limited credit term may be the answer. No matter what consequence you choose, you must act quickly.

Broken promises cannot be ignored. The future of timely payments depends on your response. Take action.

Five Ways to Increase Cash Flow

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Being pro-active is the key to increased cash flow!

Cash flowStart with your invoice system

Do you bill monthly? Depending on your sales volume, you might consider more frequent billing. Perhaps weekly or bimonthly billing would be a better fit.

Vision Casting and Forecasting

Set up a meeting with your financial advisor or your CFO to project sales and growth for the coming year. Together, forecast what it will take to maintain, grow and thrive. Will you need an increase in staff? Will you require new equipment? Map a plan with realistic outcomes.

Target Your Perfect Client

Who is the perfect client for your business? What would attract them to you? Create an ideal client portfolio to better equip your sales team so they can target new clients who will make the most impact for your business.

Carefully Weigh Incentives

Freebies and free trials are a great way to snag customers. But the best customer is a repeat customer. Will the incentives you’re offering help you gain a faithful following?

Some people look for freebies and deals. They move from one deal to the next until they’ve exhausted all the free services they can find. Those customers aren’t usually repeaters. For this reason, carefully weigh the cost of giving away your products or services. Sometimes, less is more.

Consider Your Credit Terms

Re-visit your credit terms on a regular basis to be sure you’re not encouraging your customers to pay slowly. Is “net 30” best for you or would “net 15” be a better fit for your industry? Read more about Payment Terms in our article: Payment Terms.

Small tweaks to your personal system and strategies can make a big difference in your cash flow!

Breaking Up Is Hard To Do: When to End a Customer Relationship

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Most of the time, we welcome a new customer with high hopes. Hooray! A new customer relationship! Here’s to years of success and happiness together!

Doesn’t always work out that way, does it?

GoodbyesNot every customer is one worth having even if you thought they were in the beginning.

Customers that require tons of extra time just to pay a simple invoice are a good example. When the math is done, having your staff pour hours of time into phone calls and letters for a small invoice simply doesn’t make money sense.

A yearly review of each client can help you determine if there’s a “money drain” in there somewhere. To help determine if you need to face a possible break up, take a look at the following and see if any apply:

    1. The Customer Pays Slow Consistently

Weigh the cost of chasing your slow pay down every month when the bill comes due. Do you or your staff consistently have to remind, chase, prod and poke to get a check? All that time is money. Maybe it is worth it for you when you do the math … maybe its not. Sit down with a calculator and translate the time into money to make sure you’re not losing money in the chase.

    2. Rumors Surround Your Customer’s Business

Did you get wind of an industry rumor that a customer is languishing financially? Do some digging to get to the truth. It may be useful to contact some of their credit references and to investigate their purchases of late. Is the company contracting or hiring personnel? Contracting sometimes signals a decline in business, while hiring may suggest expansion.

    3. Your Sales Team is Concerned

A typical sales team sees it all. They see when the shelves are sparse. They’re painfully away when purchases slack off. They often detect a tone in their customer and sometimes find themselves handed information on a silver platter when things aren’t going so well with a customer’s business.

Keep those lines of communication open with your sales team. Review customer files and request their feedback. Your sales team is your first line of defense!

Number One Excuse During A Collection Call

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Dog ate invoice C2C RESOURCESPeople come up with all kinds of excuses for non-payment when confronted on the phone. But quick: What’s the first excuse that comes to mind when you think about a delinquent customer?

No, it’s not “my dog ate my invoice.”

If you guessed The Check Is In The Mail, you nailed it. That excuse is used so often, it’s become a cliché!

Most of the time, it’s just not true. Sure, they may hang up the phone and immediately drop the check in the mail right then. And if they do, good! You’re getting paid. It’s not nice to be lied to, but in the end you have a check.

When you hear that excuse, there’s not much point if trying to figure out if it’s true or not. What’s more important is that they send a check immediately. To expedite that, request the check #, the amount on the check, the date written on the check and a copy of it sent by fax or scanned and emailed.

In many cases, the customer faced with the request for information from the check will simply write it and send it once they hang up the phone. Case solved.

What’s good about this strategy is that your customer quickly learns that saying the magic phrase, the check is in the mail, isn’t effective with you. You squeeze a little when that excuse is used, therefore, they’re not as likely to use it again.

Keep Up the Pressure No Matter What the Excuse

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There’s nothing new under the sun

ExcusesPeople give all kinds of excuses for not paying their bills and very few excuses are unique. It’s true in business credit and it’s true in consumer credit as well. Some of the excuses are entertaining, at least, if you’re not too busy being annoyed.

Studying possible responses for non-payment certainly has merit. By researching what works and what doesn’t work in the world of collections, you can save yourself some time and maybe even some aggravation. And while pretty much every excuse has been heard at one point or another, one thing we’ve found is that following-up in proportion to the story you’ve been given is key. The excuse itself doesn’t change the need for follow-up in most cases. It just may change your timing a little.

For example; if your customer claims he can’t pay you until his customer pays him in a day or two, then your follow-up should happen in a day or two, not a month or two. If your customer says he can’t pay till his boss returns next week – then follow up next week, not two or three weeks after that.

The excuse itself, no matter how unique, in most cases doesn’t change the need for follow-up.

The right amount of pressure can move your invoice from the bottom of the stack to the top.

Effective and EASY Follow-Up Strategy

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Get paid with this effective and easy follow up strategy

Making a collection call can yield any number of outcomes. You may get paid immediately, you may be assured payment has already been sent OR you may hear a convincing promise to pay.

If you don’t get paid on the spot, then you must follow-up on any promises made during the call. Follow-up is the key to resolving the issue. And here is one effective way to do that:

email-iconAs soon has you hang up the phone, send a “Thank You” email.

The subject line can simply read, “Thank You”. It’s non-threatening, so your customer is likely to open it right away. In the body, state in as few words as possible what you understand the next steps to be. Maybe this comes in the form of re-stating the promises your customer made on the phone. Include your expectations as you expressed them when you spoke including any dates and times mentioned in the call.

End your email with a question that requires a response. This helps to confirm the email was read and received. An example may read something like this:

Dear Ken,

Thank you for taking the time to talk with me on the phone this morning and for letting me know about the issues surrounding the invoice dated July 6.

Given the circumstances, I’ve waived the late fee. When your check arrives in a couple days, I’ll phone you to let you know.

It’s my understanding from the call that your next order will be placed on or around the 15th of March. Did I get that date correct?

Thanks again,

Tom

In many cases, a simple follow-up of this nature can serve to cement the promises made during the call.

When Your Customer Breaks A Promise

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Waste no time addressing broken promises

Working with your customers to help them achieve their business goals is part of the joys of operating a business. Seeing their success and being a part of it becomes your success.

So when a customer you work hard to serve breaks his promise to pay, it’s a blow that hits on many levels. No wonder so many put off addressing these kinds of issues right away.

Sadly, broken promises bring to light the character of the individual. Trust is broken and the relationship going forward may never be the same.

The best response to broken promises is an immediate one. Communicate right away, the very day the broken promise comes to your attention. You may wish to limit the customer’s credit or switch over to COD. Whatever response you deem appropriate, execute on it immediately.

While the “act immediately” approach applies every single time a promise is broken, it is especially crucial for that first time offender. You are setting a precedent: You expect to be paid what is owed to you.

Always remember that the longer an issue goes unresolved, the more difficult it becomes to resolve it. You’re much more likely to be paid in full if you strike while the iron is hot.

Avoid the Courtroom When Collecting a Debt

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You can avoid the courtroom!

Gavel and money, Commercial Debt CollectionsThere are alternatives to duking out a customer disagreement in a courtroom. And that’s great news because we’ve never met a businessperson who relishes the thought of a legal battle before a judge.

Collecting money that’s owed can become a true battleground if you and your customer simply don’t see eye-to-eye no matter what you try. Talks can become heated leading to exchanges that permanently damage your business relationship. The longer the conflict continues, the more complicated things can become. And when things deteriorate to the point of litigation, the loss of money and time can become enormous.

In some circumstances, arbitration may be a good way to avoid the courtroom or a long, drawn out drama.

Arbitration requires that both parties present their case to the arbitrators. The arbitrators then weigh the information and so they can hand down a decision in much the same way as a judge in a courtroom (just without the long wait time and enormous legal fee). It is most effective when both parties agree beforehand that the arbitrator’s decision will be binding.

Both arbitration and mediation are gaining momentum in part because of the significant savings to both the potential litigants as well as to the court system over all. While similar to mediation, arbitration stops short of further discussion between the parties involved, however both methods have proven effective to such a degree that in the state of Florida, many cases are required to go through mediation before being added to the court docket.

Staying OUT of the courts saves time and money. If arbitration could be effective, it may be worth a try for the savings alone.

Gaining New Customers: Best Practices for Success

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Bringing on new customers

Businessmen shaking handsWhat is your procedure for bringing on new customers? Does your process make it easy for customers to do business with you?

For new businesses, building a customer base is the only game in town. Having a system in place to ensure customer loyalty over time is a critical component to growth. And it starts at the very beginning of your business relationship.

Not only is it essential to investigate a new customer before extending credit, but in the process of set-up, your customer must find doing business with you hassle free and easy. The less steps in the process, the better.

For a practical approach to bringing new customers into your loyal customer base, check out our article: Top Best Practices for On-Boarding New Clients.